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Treasury Management and Liquidity Risk Audit Checklist

A comprehensive checklist for auditing treasury management and liquidity risk practices in financial institutions, covering aspects such as cash flow management, funding strategies, liquidity stress testing, and regulatory compliance to ensure effective liquidity risk control and treasury operations.

Treasury Management and Liquidity Risk Audit Checklist

by: audit-now
4.1

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About This Checklist

Effective treasury management and liquidity risk control are critical for the financial stability and operational efficiency of financial institutions. This Treasury Management and Liquidity Risk Audit Checklist is an essential tool for evaluating and enhancing an institution's ability to manage its cash flows, funding sources, and liquidity risks. By meticulously examining cash management practices, funding strategies, liquidity stress testing, and regulatory compliance, this checklist helps identify potential vulnerabilities, optimize treasury operations, and ensure robust liquidity risk management. Regular implementation of this checklist not only safeguards against liquidity crises but also contributes to improved financial performance and regulatory adherence in an ever-changing economic environment.

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Industry

Financial Services

Standard

Basel III Liquidity Standards

Workspaces

Bank branches

Occupations

Treasury Manager
Liquidity Risk Analyst
Financial Controller
Risk Management Officer
Regulatory Compliance Specialist
1
Is the institution compliant with the Liquidity Coverage Ratio (LCR) requirements?
2
What is the current Net Stable Funding Ratio (NSFR)?
Min: 100
Target: 100
Max: 200
3
How frequently are liquidity stress tests conducted?
4
Is the contingency funding plan reviewed at least annually?
5
What method is used for cash flow forecasting?
6
What is the current forecasting horizon in months?
Min: 1
Target: 12
Max: 36
7
How would you rate the accuracy of cash flow forecasts over the last year?
8
Are regulatory changes factored into cash flow forecasts?
9
How diverse are the funding sources used by the institution?
10
What is the average cost of funds as a percentage?
Min: 0
Target: 3.5
Max: 10
11
How often is the funding strategy reviewed?
12
Is the funding strategy aligned with the overall business strategy?
13
Is the institution compliant with all relevant regulatory requirements?
14
Who is the designated compliance officer for the institution?
15
When was the last compliance audit conducted?
16
How many compliance violations were reported in the last year?
Min: 0
Target: 2
Max: 100

FAQs

These audits should be conducted at least annually, with more frequent reviews recommended during periods of market volatility or significant changes in the institution's funding structure.

Key areas include cash flow forecasting, funding source diversification, liquidity buffer adequacy, intraday liquidity management, stress testing methodologies, contingency funding plans, and compliance with regulatory liquidity ratios.

These audits are typically conducted by internal audit teams, treasury specialists, risk management professionals, or external auditors with expertise in treasury operations and liquidity risk management.

The checklist includes items that assess the comprehensiveness of stress scenarios, the quality of data inputs, the appropriateness of assumptions, and the integration of stress test results into liquidity risk management strategies.

Yes, the checklist can be customized to address specific treasury management and liquidity risk requirements of various financial institutions, such as commercial banks, investment banks, or credit unions, while maintaining core audit elements.

Benefits of Treasury Management and Liquidity Risk Audit Checklist

Ensures compliance with liquidity risk management regulations and internal policies

Identifies weaknesses in cash flow forecasting and management processes

Enhances funding diversity and stability of liquidity sources

Improves effectiveness of liquidity stress testing and contingency planning

Strengthens overall treasury operations and financial risk management